Avoidance Of Policies For Misrepresentation By Brokers

In a recent decision, the Court of Appeal held that misrepresentations as to the intention of the reinsured, made by the broker and unknown to the reinsured, nevertheless entitled the reinsurer to avoid the policy. This automatically included an endorsement varying the policy period. The Court did not, however, consider that the representation was implicitly reiterated at renewal and the reinsurer was not entitled to avoid the renewal policy.

The case concerned first loss fac/oblig reinsurance treaties under which the reinsured's energy accounts were reinsured by the reinsurer. In the fax covering sheet to the reinsurance placing information, the broker stated that Limit "would not normally write construction risks unless the original deductible were [sic] at least £500,000 and preferably £1,000,000".